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Tuesday, 8 April 2008

Rural Vs Urban Inflation

JCTR produce a monthly "basic needs basket", that tracks how prices are changing in Lusaka, (and are separately taking forward a rural basket). See the latest press release and associated data for March 2008. It shows a 20% year on year increase in prices for a family of six in Lusaka. Quite insightful given that the official figures have national inflation at under 10%. The JCTR release would suggest the national figures must be 'hiding' a lot of inflation variability i.e. higher urban inflation / very low rural inflation. To really know whether this matters, we need to see whats happening to wages across the spectrum. I am off to hunt for the data!

11 comments:

  1. To really know whether this matters, we need to see whats happening to wages across the spectrum.

    Don't forget the access to services (irrelevant of cost). The existence of schools or hospitals in cities causes a big part of rural exodus.


    But in general, how much the urban inflation figure reflects a hike in transport costs (for food to get there), the fact that cities are net food importers and a renter's housing market ?

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  2. 45% of the increase of BNB between Feb 2007 and Feb 2008 is Housing and Charcoal. (yes i was bored and crushed a bit of data). Had those two not changed, you have gotten 11%. instead of 21% prices increase.

    Also what's up with the onion prices ? 113% increase ?

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  3. Has anyone thought about reducing the price of charcoal, by reducing the demand for wood?

    If all paper and disposable packaging like egg boxes were made from hemp instead of wood pulp, that would be very environmentally friendly as well.

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  4. Random,

    "Don't forget the access to services (irrelevant of cost). The existence of schools or hospitals in cities causes a big part of rural exodus."

    This would suggest that we should worry a lot more about urban inflation, but the flip side is that most people live in rural areas.

    "But in general, how much the urban inflation figure reflects a hike in transport costs (for food to get there), the fact that cities are net food importers and a renter's housing market ?"

    This really hints at the problem of national figures. In African countries the "national bread basket" is a meaningless concept. Its skewed towards urban areas. For example, poor people in rural areas consume very different things fromtheir urban counterparts. So to some extent its not just the rate at which the mechanisms are feeding through but whether they feed through at all!

    As you say, its quite probable that urban areas are feeling the rise in oil prices, etc than the rural areas.

    I guess my question of whether it matters, was also more for the politicians. Should they be concerned? Does it matter that price rises in urban areas are so high relative to poor areas?

    "45% of the increase of BNB between Feb 2007 and Feb 2008 is Housing and Charcoal."

    Good find.
    I didn't see the Feb 2007 figure there :)
    You must have been crunching the JCTR site!

    The reason for urban charcoal demand is purely the power cuts. In rural areas there's plenty of charcoal and an low penetration of electricity. In the last few months the power outtages and continous load shedding has boasted demand for charcoal in urban areas.

    Housing….well all I know is that Lusaka is booming and the council has no space….but where are the people coming from????? Rural areas…..
    In guess some might argue that urban inflation cannot be that bad if it is not dissuading people from moving there…right???

    Mrk,

    "Has anyone thought about reducing the price of charcoal, by reducing the demand for wood?"

    Difficult to see how that can be done in rural areas.

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  5. http://www.jctr.org.zm/bnbasket.html

    On the right side, it has links to 2008, 2007 and 2006 figures in different places. You have to scroll down.
    I wish the site was better designed, but I can't really complain, at least the data is online (which isn't the case in my country) !

    In African countries the "national bread basket" is a meaningless concept. Its skewed towards urban areas. For example, poor people in rural areas consume very different things fromtheir urban counterparts.

    Is it skewed towards urban areas ? I'm not sure.. But then again, national inflation figures are a complicated thing and depend on the use you make of it. For instance the US government doesn't include gas and food prices in its data. I guess they're concerned about the "monetary" inflation and know that the switches in gas and food prices can skew the data.
    So I guess the Central Bank and JCTR data do not have the same goal. And I understand why the Unions would use the JCTR data.

    In guess some might argue that urban inflation cannot be that bad if it is not dissuading people from moving there…right???

    Well yeah.. Like I said, there is the issue of availability of some services or some opportunities. Schools, Hospitals, clerical jobs, more choices in general..etc.. plus beer is cheaper. :-)
    That said you shouldn't generalize based on those figures. Many of prices barely change from Feb 2007 to Dec 2007, however there's a sudden bump in the first months of 2008. And furthermore, most of those prices tend to be very sticky. They don't change for a while and suddenly bump (or drop). I figure some, like water costs or some food stuff are set by the government, which explains the sudden movements. And other vary suddenly because of an unsmooth market (what if the soap is supplied every six month by one boat from China and one or two trainloads from Tanzania ?).

    Are you sure charcoal demand is related to the availability of electricity and not gas ? I mean it's used to cook, not to light, right ?

    And I haven't looked at the figures for other cities, but I expect some variations, depending on demand or relative transport costs.

    Do you want me to send you the excell file I made containing (some of) the data ?


    And, Mr K,

    Has anyone thought about reducing the price of charcoal, by reducing the demand for wood?


    Those two are probably not as related as you think. The local wood used for charcoal may not be competing with the wood used for paper.
    (and i bet there is a tragedy of commons thing going on and the price of charcoal may be going up because the wood is cut and burned further and further away from Lusaka)

    If all paper and disposable packaging like egg boxes were made from hemp instead of wood pulp, that would be very environmentally friendly as well.

    Not if the goal is to lower the price of charcoal.
    Cheap charcoal would make you end up like Haiti.

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  6. yeah Housing is a partial statistical illusion. The price goes up in december/january only.

    However, it tended to go up by 50,000 before and went up by 100,000 this time.

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  7. Cho,

    Mrk,

    "Has anyone thought about reducing the price of charcoal, by reducing the demand for wood?"

    Difficult to see how that can be done in rural areas.

    There are different ways of doing this too. Making some water available for irrigation, and selecting fast growing species, would save existing forrests and make wood and charcoal available to a greater degree, thereby putting pressure on prices.

    However, to the extent that actual forrests are cut down for paper and cardboard, those can be replaced by the much faster growing hemp - 2-3 months from seed to harvest, and with available water, there could be 4 harvests per year. And hemp grows with very little or no pesticides or fertilizer (which can be home made). It doesn't deplete the soil, in facts adds organic matter to it through it's root mass.

    And, it is a fiber crop that can grow well in the dryer areas too.

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  8. "Are you sure charcoal demand is related to the availability of electricity and not gas ? I mean it's used to cook, not to light, right ?"

    Gas in Zambia? Everything runs on electricity lol!

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  9. MrK,

    I guess my point was that people in rural areas always opt for a cheaper alternative. But even if it was cheaper, you would need to persuade villagers that it was cheaper!

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  10. You don't use cooking gas in Zambia ?
    That's interesting !

    And on charcoal,

    To what extend paper and charcoal really compete for the same wood ?
    Do they use the same species ? Is the geographic origin of the two the same ?

    Correct me if i'm wrong and it's different in Zambia, but almost everywhere else the charcoal markets are quite local. Both the cutting and the transformation are done close to the consumption centers.

    But even if it was cheaper, you would need to persuade villagers that it was cheaper!

    Yeah. Especially if one has the option to use wood from common areas. It's more than free !

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  11. "Correct me if i'm wrong and it's different in Zambia, but almost everywhere else the charcoal markets are quite local. Both the cutting and the transformation are done close to the consumption centers."

    Precisely.

    ReplyDelete

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